British opposition allege that traders 'gambling on country's failure', Latest World News - The New Paper

British opposition allege that traders 'gambling on country's failure'

This article is more than 12 months old

LONDON Britain's opposition parties are hitting out at currency speculators betting against the pound while bankrolling the leadership campaign of pro-Brexit Prime Minister Boris Johnson.

However, allegations of conflicts of interest are difficult to prove in the highly globalised and largely unregulated foreign exchange markets.

Mr John McDonnell, the main opposition Labour Party's finance spokesman, warned that Mr Johnson's supporters could be pressing him for a no-deal Brexit to benefit their currency market positions.

He told MPs last week some traders were "gambling on the country's failure" and accused Mr Johnson's ruling Conservatives of getting hundreds of thousands of pounds "from individuals who back a no-deal Brexit, many involved in hedge funds".

Backed by the Liberal Democrats, Mr McDonnell has demanded an inquiry and wrote to Cabinet Secretary Mark Sedwill, Britain's top civil servant, to outline his concerns.

Former finance minister Philip Hammond, an opponent of Britain leaving the European Union without a divorce agreement, has also expressed his concerns over potential currency trades related to no deal.

The government dismissed the concerns as "myths" and refused to open an investigation or comment on individual Tory donors.

Among those implicated in the allegations is Mr Crispin Odey, a hedge fund manager, leading backer of a no-deal Brexit and Mr Johnson.

He donated £10,000 (S$17,000) to Mr Johnson's Conservative leadership campaign and has given almost £900,000 to pro-Brexit campaigns, according to media reports.

Mr Odey told The Guardian that claims that his support was motivated by an opportunity to make millions from short-selling British companies and the pound was "absolute rubbish".

Foreign exchange markets have always been highly speculative: US billionaire George Soros made his fortune by betting against the pound in the 1990s and recently funded efforts to bring about another referendum on Britain's EU membership.

Anti-EU populist Nigel Farage, a former commodities trader, was accused of using the 2016 referendum to fuel speculation on the pound, which he has denied. Before the official announcement of the results, he sent the pound spiking by conceding the likely defeat of his pro-Brexit camp.

But experts said the sheer weight of the foreign exchange market - where more than US$5 trillion (S$6.9 trillion) is traded daily - makes it hard for individuals to have a big impact.

Mr Craig Erlam, an analyst at Oanda, is among those predicting an additional 20 per cent drop in the currency's value in a no-deal Brexit. - AFP